Not all advisers are the same
For the vast majority of people buying their home will be the biggest financial commitment they will ever make.
In this post credit crunch world, the lending criteria of banks and building societies varies enormously; where one lender may say no, another will happily lend. Mortgage products vary significantly too, with the lowest interest rate not always being the most cost-effective option.
It is more important than ever to obtain the right advice.
However, not every mortgage is the same.
Most mortgage lenders hide fees and homeowners who have not taken mortgage advice, could easily find themselves paying thousands more, by being locked into excessive mortgage penalties.
The only way to ensure that you find the deal that is best for you is to talk to a professional who has access to the whole of the market.
As our name suggests, at Choice Financial Solutions we offer you the widest level of choice and access to the whole of the market.
Types of Mortgage
A fixed rate mortgage gives you peace of mind. With a fixed mortgage, you know that whatever happens to interest rates, your monthly payments will stay the same for the agreed period.
Fixed rate mortgages are available for many different periods of time; two years, five years and 10 years are typical examples but there are different fixed rate mortgage periods available.
Fixed rate mortgages often have an early repayment charge which will vary from lender to lender. Normally, this only applies during the fixed rate period itself. But some do have repayment penalties that extend past the end of the fixed rate period.
One disadvantage of fixed rate mortgages is that you will not benefit from any fall in interest rates. As we said, during your fixed period your payments will remain exactly the same. At the end of the fixed rate period your payments will generally revert to the lender’s standard variable rate (SVR). You are then free to negotiate another mortgage product or consider a remortgage.
Fixed rate mortgages are very popular and are suitable for people who want to know exactly how much they are going to be paying each month. Of course, they will also protect you against rising rates.
Trackers & Discounts
Tracker and discounts are ultimately variable rates.
The difference is simple. A tracker rate mortgage is linked to the Bank of England base rate Your mortgage will be guaranteed to move in line with any changes to that rate. With a discount rate mortgage you are linked to a lender’s Standard Variable Rate (SVR), which they can move as their discretion. For that reason, we generally recommend tracker rates above discount rates.
The best tracker or discount mortgage for you will depend on your specific requirements.
Trackers or discounts can apply for the life of the mortgage or for an agreed period. Often people will look to benefit from lower payments for a few years and then remortgage to a new lender on another deal.
A capped rate mortgage is a variable rate that has a ceiling level; the “cap”. This mortgage may help you benefit from a lower rate initially and gives you an element of peace of mind, because you know it will not rise above a certain level for an agreed time.
An offset mortgage allows you to hold money in a linked savings account, which ‘offsets’ what you owe on your mortgage on a daily basis. The mortgages are more complex and we generally only recommend them in more specialist circumstances.